Recent elections in Brazil and Israel illustrate how differing political outcomes can influence national financial stability, according to a 2026 study of 147 elections in 22 OECD economies.

The research defines systemic risk as the possibility that distress at one bank or sector triggers a cascade across the whole financial system, a pattern first seen during the 2008 global financial crisis.

Systemic risk follows a hump‑shaped trajectory: it falls in the months before scheduled elections, then rises during the vote and can remain heightened for up to twelve months, particularly when the incumbent government is ousted.

Brazil’s surprise runoff victory for Luiz Inácio Lula da Silva in October 2026 triggered a sharp market reaction, with the benchmark stock index dropping 13.9% and the real losing 8.1% against the dollar on the day after the vote.

Although the Brazilian market recovered modestly the following day, analysts note that the immediate dip does not signal a banking crisis; longer‑term stability will depend on how banks and borrowers absorb the shock.

In Israel, an inconclusive October 27 election left no clear governing bloc, raising policy uncertainty. The day after the vote Israeli equities fell about 3%, the shekel weakened 2% against the dollar, and ten‑year bond yields rose nearly five basis points.

The study also links snap elections to larger spikes in systemic risk, noting Israel’s history of ten elections since 2000, seven of which were snap votes, as a key example.

The authors conclude that political continuity is a financial asset, yet Brazil’s 2026 surprise result shows continuity alone does not automatically reassure investors; rebuilding confidence will require credible fiscal plans and sustainable debt strategies.